Could Taxing Disused Land in Wales Spark a Housing Boom?

Welsh government ministers are advocating for a vacant land tax to combat land banking and encourage the development of disused plots across Wales. This initiative, intended to stimulate house building, is set to be discussed in a joint consultation between the UK and Welsh governments, though the exact timeline remains uncertain. The Welsh Finance Secretary, Mark Drakeford, emphasised that the aim is to change behaviour rather than simply raise revenue.

Last updated: 13 October 2023 (BST)

What’s happening now

The Welsh government is pushing forward with plans for a vacant land tax in response to the ongoing issue of land banking—where developers purchase land without immediate plans for development. This tax aims to incentivise the construction of homes on unused sites, thereby addressing Wales's housing shortage. While the Welsh Secretary Jo Stevens has indicated the potential for a "positive and tangible" impact, specific details regarding implementation and expected revenue generation remain vague.

Key takeaways

• Welsh ministers are advocating for a vacant land tax to discourage land banking.
• A consultation between the UK and Welsh governments is imminent, though timing is uncertain.
• The initiative aims to promote housing development rather than just generate revenue.

Timeline: how we got here

Here’s a brief timeline of significant developments regarding the vacant land tax in Wales:

• 2018: Initial proposals for a vacant land tax were presented by the Welsh government to the UK government.
• 2020: Research commissioned by the Welsh government revealed 456 stalled sites in Wales, highlighting the extent of land banking issues.
• 2021: A formal submission was made for devolved powers to introduce the tax, but discussions stalled due to disagreements with the Treasury.
• 2023: The Welsh government announces plans for a joint consultation with the UK government regarding a vacant land tax.

What’s new vs what’s known

New today/this week

The announcement of a forthcoming consultation on the vacant land tax marks a significant step for Welsh ministers. Jo Stevens has stated that this initiative could lead to a more efficient use of land and ultimately increase the housing supply in Wales.

What was already established

Previous discussions regarding a vacant land tax have taken place, emphasising the long-standing issue of land banking in Wales. Research from 2020 has already highlighted the need for action on stalled development sites.

Impact for the UK

Consumers and households

The proposed vacant land tax could impact consumers by potentially increasing the availability of affordable housing. With more plots being developed, the hope is to ease the housing crisis that many communities face, particularly in urban areas.

Businesses and jobs

For developers and construction firms, the introduction of a vacant land tax may create new opportunities. Increased development activity could lead to job creation in the construction sector, while also stimulating related businesses such as suppliers and service providers.

Policy and regulation

This initiative represents a significant policy shift for the Welsh government and requires the agreement of the UK government. The successful devolution of powers to implement this tax will depend on legislative approval from both the UK Parliament and the Senedd in Wales.

Numbers that matter

• 456: The number of stalled development sites identified in Wales, with 376 designated for residential use.
• £0: The Welsh government has indicated that the primary goal of the tax is not to raise money but to encourage development.
• May 2024: The upcoming Senedd election, which may influence the timing and outcome of the consultation on the vacant land tax.

Definitions and jargon buster

• Vacant Land Tax: A proposed tax aimed at discouraging land banking by taxing land that is suitable for development but remains undeveloped.
• Land Banking: The practice of purchasing land to hold for potential future development rather than immediate use.
• Senedd: The Welsh Parliament, responsible for making legislation and decisions affecting Wales.

How to think about the next steps

Near term (0–4 weeks)

Expect the Welsh and UK governments to release details regarding the consultation process, including timelines and objectives for the vacant land tax.

Medium term (1–6 months)

Following the consultation, there may be legislative moves to devolve powers for the tax, subject to approval from both parliaments. Stakeholders will need to engage actively in these discussions to ensure their perspectives are considered.

Signals to watch

• Official announcements regarding the consultation timeline.
• Responses from opposition parties and stakeholders on the proposed tax.
• Progress on legislative discussions in both the UK Parliament and the Senedd.

Practical guidance

Do

• Stay informed about the consultation process and provide feedback if possible.
• Engage with local representatives about community needs regarding housing development.

Don’t

• Assume that the vacant land tax will be implemented without considering the legislative process involved.
• Overlook the importance of community engagement in shaping housing policies.

Checklist

• Review current housing needs in your community.
• Monitor announcements from the Welsh government regarding the tax consultation.
• Consider how potential changes could affect your property or community.
• Engage with local councils about stalled sites in your area.
• Stay updated on the outcomes of the upcoming Senedd election.

Risks, caveats, and uncertainties

There are several uncertainties surrounding the proposed vacant land tax. The actual implementation depends heavily on legislative approval and cooperation between the UK and Welsh governments. Additionally, the opposition parties have expressed scepticism, indicating that the public needs clearer data and timelines regarding the impact of such a tax. Furthermore, the political landscape could shift significantly following the upcoming Senedd election, possibly affecting the viability of the tax.

Bottom line

The proposal for a vacant land tax in Wales represents a proactive approach to addressing the housing crisis. While the intentions behind the tax are focused on changing behaviour and promoting development, its success will depend on effective consultation, legislative backing, and the political will to implement meaningful changes. Stakeholders should remain engaged as this initiative unfolds.

FAQs

What is a vacant land tax?

A vacant land tax is a proposed tax aimed at discouraging land banking by taxing land that is suitable for development but remains undeveloped, thereby encouraging its use for housing.

How will the vacant land tax impact housing in Wales?

The vacant land tax is intended to stimulate development on disused sites, potentially increasing the availability of housing and addressing the housing shortage in Wales.

When will the consultation on the vacant land tax occur?

The consultation between the UK and Welsh governments is expected to happen in the near future, but specifics about the timeline have not yet been confirmed.